SINGAPORE (May 8): A consortium of investors led by Singapore-listed Perennial Real Estate Holdings announced on May 6 that they are selling a 50% stake in AXA Tower and transferring 50% of the outstanding loan to Alibaba Singapore, a subsidiary of NYSE-listed Chinese e-commerce behemoth, Alibaba Group Holdings. The deal is based on a property purchase price of $1.68 billion for AXA Tower. JLL was the adviser to Alibaba Singapore on the deal, which is expected to be completed by end-June 2020.
The Perennial-led consortium has in turn transferred the remaining 50% equity stake in AXA Tower and the remaining 50% outstanding loan to a new entity, PRE 13. Upon completion of the deal, PRE 13 will enter into a jointventure agreement with Alibaba Singapore to redevelop AXA Tower.
Other investors in the Perennial-led consortium include HPRY, a wholly-owned investment company of Kuok Khoon Hong, group chairman and CEO of Wilmar International, who is one of the largest sponsors of Perennial as well as its chairman. Perennial’s existing stake in AXA Tower is 31.2% and HPRY holds a 10.1% stake, bringing Kuok’s deemed interest in AXA Tower to 41.3%.
Following the divestment, Perennial’s stake will be pared to 20% in PRE 13, and a direct stake of 10% in AXA Tower. Perennial’s share of the net proceeds will be about $196.4 million, and its share of the divestment gain will be $45 million. After reinvesting $58.8 million into PRE 13, Perennial will have net proceeds of $137.6 million.
Another investor in the Perennial-led consortium is Singapore Press Holdings, whose wholly-owned subsidiary PE One Pet Ltd had acquired a 5.29% stake in AXA Tower for $19.3 million back in 2015. PE One will receive $33.2 million from the sale to Alibaba.
PE One will reinvest $5.9 million of its proceeds for a 2% stake in the new entity, which represents a 1% effective interest in the redevelopment of AXA Tower.
A cylindrical building, the 50-storey AXA Tower is a landmark in the CBD. When completed in 1986, it was the tallest skyscraper in Singapore. It has an auspicious address of 8 Shenton Way and was originally the Treasury Building. It was then renamed Temasek Tower in 1997 after the Ministry of Finance and Ministry of Trade and Industry relocated to The Treasury on High Street. It was renamed AXA Tower in 2011 when global financial services industry giant AXA became an anchor tenant.
The Perennial-led consortium had purchased AXA Tower in 2015 for $1.17 billion, or $1,735 psf of net lettable area (NLA). Prior to that, the property was in the hands of BlackRock which assumed ownership after it took over independent private equity real estate investment firm, MGPA. One of MGPA’s funds, MGPA Fund II, had purchased the building in 2007 from Singapore-listed CapitaLand for $1.039 billion ($1,550 psf of NLA).
After purchasing AXA Tower, Perennial also announced that it was undertaking asset enhancement works, which would increase the retail footprint, building a two-storey annex block of about 32,000 sq ft to house medical suites as well as enhancing the main office lobby and drop-off points. The NLA would be increased from about 674,000 sq ft to 767,358 sq ft upon completion of asset enhancement works by end-2021.
However, asset enhancements to date are likely to increase total strata area (including office, retail and medical suites) at AXA Tower to about 740,000 to 750,000 sq ft. And these are scheduled for completion by the end of the year.
Back in 2017, Perennial had explored strata sales of selected office units at AXA Tower. In fact, one strata office unit was actually sold: Based on caveat lodged with URA Realis, the 3,520 sq ft office unit on the 39th floor was sold for $10.384 million ($2,950 psf) in January 2017. However, the unit was subsequently bought back by Perennial.
Perennial had also explored an en bloc sale of the whole tower for $1.65 billion three years ago, according to media reports in late 2017. The property was valued at $1.247 billion then.
AXA Tower has obtained URA’s approval to increase its existing gross floor area (GFA) from $1.05 million sq ft to 1.24 million sq ft under the Master Plan 2019. Approval has also been obtained to further increase AXA Tower’s GFA to 1.55 million sq ft should it be redeveloped into an integrated development that includes hotel and residential components. The bonus GFA awarded is part of the CBD Incentive Scheme announced by the URA in March last year in the Master Plan 2019 to encourage mixed-use developments to rejuvenate the CBD. After all, AXA Tower was built 34 years ago, and has 61 years left on its 99-year lease which dates back to 1982.
It will be interesting to see how the new landmark will reshape Singapore’s CBD skyline when the tower is redeveloped by Alibaba and the Perennial-led consortium
